-14 votes

Vulture Capitalism — Not Unions — Killed Twinkies

Hedge funds took profits and piled on millions in debt at Hostess. They created this bankruptcy, not unions

By Jake Blumgart | Salon.com

As Hostess moved to end its operations last week — a bankruptcy judge asked the company Monday to try mediation with its unions; those talks are scheduled to begin today — commentators were eager to blame the rigidity of unions.

But the story is far more complicated than that — and in some ways, the exact opposite of the tale pushed by those on the right. It’s the story of two bankruptcies, hundreds of millions of givebacks from Hostess unions and hundreds of millions of debt piled onto the company by venture capitalists. It’s a story of management that boosted its own salaries, while failing to make agreed payments into workers’ pension funds. And it’s a story of changing tastes and diets.

To begin with, when was the last time you ate a Twinkie or chose spongy Wonder Bread over an artisanal or organic load? The company simply hasn’t been able to adequately compete due to a stodgy, moribund management that did not act to diversify a product base that hasn’t changed with the times (unless you count 100-calorie Twinkies packs). As the New York Times reported way back on Sept. 23, 2004, “People are still eating Hostess Twinkies and Wonder Bread, but the problem for Interstate Bakeries is that they are eating less of them.”

Read more: http://www.salon.com/2012/11/20/vulture_capitalism_not_union...

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.

I still think we're not getting the whole story

I think the whole story has more to do with GMF and UN regulations and the recipes are not suitable for human consumption.


Do you have GMF and UN regulations on the brain? Please give me a link to an article connecting Hostess to either one?

"Timid men prefer the calm of despotism to the tempestuous sea of liberty" TJ


The UN Agenda for sustainable delevelopement is happening globally, affecting all corporations that do business on an international level. Is Hostess not international?

Rather than call it vulture capitalism, if true isnt this more

a case of a mismanaged company with poor shareholder oversight?

Indeed, if a company's managers can't manage and choose to pay themselves instead or workers they deserve to go bankrupt.

Unfortunately that means workers also lose their jobs-but won't they be better off with an entity that is better managed and can make a good product and a profit?

Why have a court try and tell a company how to run a business? If they don't know how, they need to fail.

Please subscribe to smaulgld.com

Just ran across this article where Matt Taibbi

weighs in on the Hostess situation.

Matt is often spot on in identifying issues-check out his scathing criticism of Goldman Sachs.
However his recommended solutions are in my opinion totally off base -more government to regulate out of control capitalist entities.

In the hostess case, Matt perhaps rightly points out that Hostess was mismanaged. He may be right. But so what? what is to be done? MAKE Hostess smarten up via court order so they can learn how to compete so they don't have to fire any one?

Here is the story

Please subscribe to smaulgld.com

When an employee takes a job with a company

they entrust their fortunes as employees to the management of the company. Management has a fiduciary duty towards the shareholders to run the company for their benefit.
Usually this means they treat customers and employees fairly and somehow as a result produce a good product at a decent price and after expenses including employee salaries, make a profit.

If they cant do this because they pay themselves too much money, or have to pay employees too much money or people wont buy their product in large enough volumes to make money, they go out of business.

Ultimately management is responsible for the fortunes of the company. If they screw up, employees will lose their jobs and shareholders will lose money.

Those are just the facts, courts and government should not have a role in making management do a better job. (this btw is outside of most courts and governments' competencies)

That is what competition is all about. If another group of investors or shareholders want to take a buy hostess and take a crack at running it better, let them.

Please subscribe to smaulgld.com

No, Vulture capitalism, COMBINED

with unions killed Twinkies. Surprise, the "left" is just as stupid as the "right". The "right" blames only unions and the "left" blames "capitalism".

The issue is capitalism has winners and losers

Its irrelevant whether the unions asked for too much or the management paid themselves too much.

The result is management could not make a profit and did not manage their labor issues in a way where they and labor were satisfied.

Hence, a failure of the company-that happens and courts and government are not equipped to second guess poor business decisions in hindsight.

The solution is bankruptcy and maybe a group of investors comes in and thinks they can produce twinkies at a profit and buys Hostess and has a go at it.

Please subscribe to smaulgld.com

I won't argue that.

I believe that we could see Hostess back-in a profitable business.......... As long as government stays out of it. The courts have nor right to intervene whether their was "vulture capitalism" or not. Now that the courts are involved, who knows.

Let it die and let the market decide if it is viable. I believe it is viable with the right investors and management. As long as the union is involved, it won't be made into a real winner, only artificial, like the U.S. Auto industry.

I don't promote any type of government intervention into the marketplace. And I definitely don't promote unions in the marketplace either. They are based on violence and coercion. They skew the market by artificially pushing wages higher than the market sets.

Agree the govt should not give special rights to the union

Or to companies

Please subscribe to smaulgld.com

Cyril's picture

+1 DITTO that.

+1 DITTO that.

"Cyril" pronounced "see real". I code stuff.


"To study and not think is a waste. To think and not study is dangerous." -- Confucius